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LEGO sees 8% drop in revenue despite double-digit growth in China

The LEGO Group described 2017 to be a “challenging year”, following an 8% decline in revenue from DKK 37.9 billion in 2016 to DKK 35.0 billion for the year ended 31 December 2017.

The decline can attributed to the clean-up of inventories across the value chain, which impacted its operating profits. The group also cut its global workforce by 8% – approximately 1,400 jobs – last year to simplify its business model. While global consumer sales were flat, it trended upwards during the final months of 2017.

Revenue grew strong double-digits in China, where the group continues to expand its presence through retail channels, e-commerce and digital platforms. According to CEO Niels B. Christiansen, the group started 2018 “in better shape”. In January, it entered into a partnership with Tencent and intends to further expand its presence in China. LEGO aims to stabilise the business in 2018 by continuing to invest in products, effective global marketing and improved execution. It also plans to open an office in Dubai towards the end of 2018, to support efforts to expand operations in the Middle East and Africa.

Performance of classic LEGO ranges was satisfactory across the group’s portfolio. LEGO City, LEGO DUPLO, LEGO Creator and LEGO Friends continued to perform well, while LEGO NINJAGO benefited from the release of the movie last September. According to the press statement, LEGO Star Wars products, released in the second half of 2017, performed in line with expectations.

While revenue in established markets in North America and Europe declined in 2017, total consumer sales across a number of these markets improved, particularly in the final months of 2017. However, the group sees opportunities to return to growth in these regions and will work closely with retail partners to engage more children.

The group conducts a range of research and development activities such as trend spotting, anthropological studies and the development of specific products and campaigns. It also collaborates with educational institutions for various projects covering children’s play and new technologies, among others. Moving forward, LEGO expects to grow low single digits in line with the global toy market. This is expected to be achievable due to its continued focus on innovation, growth in established markets and its commitment to global expansion.

Last year, LEGO moved its chief commercial officer Loren I. Shuster from its Asia Pacific office in Singapore to London, taking on a whole new role as LEGO’s chief people officer. Earlier this year, Rafael Scislowski, LEGO Group’s senior director of Asia Pacific regional marketing, left the company to join Uber as its marketing director of Southeast Asia.